Alcoa profit climbs as South32 shareholders clear the AliGroup deal

Alcoa Corporation posted higher third-quarter profit and strong free cash flow on Thursday as South32 Limited's shareholders approved the company's planned AliGroup acquisition and aluminum production rose for a sixth straight quarter.

Profit rose even as sales slipped

Alcoa reported net income of $483 million, or $1.81 a share, for the quarter ended Sept. 30, up from $407 million, or $1.53 a share, in the second quarter and $232 million, or $0.88 a share, a year earlier.

Revenue was $3.70 billion, down about 7% from $3.97 billion in the spring but up about 24% from $3.00 billion a year earlier. Adjusted earnings, which strip out special items, were $1.82 a share, compared with $2.12 in the second quarter. Adjusted EBITDA excluding special items was $789 million, down from $901 million sequentially and up from $270 million a year earlier.

The company said the sequential drop in adjusted EBITDA came as lower aluminum prices and shipments outweighed better production costs and higher alumina prices.

Cash and the South32 deal

Cash from operations was $643 million, and free cash flow was $472 million. Alcoa ended September with $4.4 billion in cash, including $2.6 billion raised in September to help fund the AliGroup acquisition — South32 Limited's interests in certain bauxite, alumina and aluminum assets.

On the same day as the results, South32 shareholders approved the deal. Alcoa said the transaction remains on track to close in the first half of 2027, subject to remaining regulatory and other closing conditions.

President and CEO William F. Oplinger said the company advanced the acquisition, improved refinery performance and raised smelting output in the quarter, and that it remains focused on safety, operational stability and closing AliGroup.

More metal from the smelters

Aluminum production rose for a sixth straight quarter, to 649,000 metric tons, up 2% from the spring, helped by capacity restarts completed earlier and the finish of the Alumar smelter restart in Brazil. Alumina production rose 11% sequentially to 2.5 million metric tons after more stable runs at the Pinjarra refinery in Australia.

Third-party alumina shipments rose 2% sequentially. Total aluminum shipments fell 5% after elevated second-quarter volumes tied to earlier inventory repositioning. Alumina segment third-party revenue rose 7% on higher realized prices and shipments; aluminum segment third-party revenue fell 9% on lower shipments and prices.

Alcoa also said it signed definitive sale agreements for portions of its Massena East, New York, site that could bring in as much as $315 million.

What the company expects next

Management reaffirmed full-year 2026 alumina production of 9.5 to 9.6 million metric tons and shipments of 11.5 to 11.6 million metric tons, and aluminum production of 2.4 to 2.6 million metric tons and shipments of 2.6 to 2.8 million metric tons.

For the fourth quarter, it expects higher production and shipments in both segments. Aluminum segment adjusted EBITDA faces about $30 million of sequential headwinds from higher raw-material costs and planned maintenance, plus about $30 million of sequential alumina-cost pressure inside the aluminum segment. Other income is expected to rise by about $20 million on interest earned on cash held for AliGroup. Full-year interest expense is now expected at about $185 million after the September notes offering.

How the stock traded

Shares closed at $40.42 on Thursday, up about 0.8% from Wednesday's close of $40.08, before the results were out. In after-hours trading they were at $40.75 at 6:23 p.m. ET, up about 0.8% from the close, according to CNBC market data. Executives scheduled a call with investors for 5 p.m. ET Thursday.